Canada: Do The Innocent Get Compensation After MOE Orders?

Last Updated: September 18 2012
Article by Dianne Saxe and Meredith James

Cleaning up your neighbour's mess: Recovery of spill clean-up costs by the innocent party.

It is clear that any civilized system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is to prevent a man from retaining the money of or some benefit derived from another which it is against conscience that he should keep. Such remedies in English law are generally different from remedies in contract or in tort, and are now recognized to fall within a third category of the common law which has been called quasi-contract or restitution.1

Do we, in Ontario, have effective remedies when innocent parties are forced to pay for contamination they did not cause?

Under the Environmental Protection Act,2 an innocent party can be ordered to bear the cost of addressing the consequences of a spill or other contamination – including delineation, clean-up, studies, and more. A complete absence of fault is not an effective defence. In justifying imposing such costs on the innocent, the Ministry of the Environment, the Environmental Review Tribunal (ERT),  and any reviewing court, tend to airily claim that the innocent party can obtain compensation through "other legal avenues".

In practice, this is often untrue. Based on our review of the case law, the theoretical statutory and common law mechanisms for compensation have not produced any successful recoveries using the compensation provisions under the EPA, or  in unjust enrichment.


There are a number of provisions in the EPA which have been, or could be, used to order innocent parties to deal with the adverse effects of a spill.

a. Preventative Measures Order – Sections 18 and 157.1

Both the Director of the MOE and provincial officers can issue preventative measures orders under sections 18 and 157.1, respectively, of the EPA. A section 18 order can be issued against a "person who owns or owned or has or had management or control of an undertaking or property". Both current and past owners of a site can be ordered to clean up contamination. Section 157.1 allows a provincial officer to issue an order to a person who "owns or who has management or control of an undertaking or property" and is limited to measures intended to prevent future discharges of contaminants from the property.

Section 18 was the basis for the Director's clean-up order in 724597 Ontario Ltd., Re ("Appletex").3 The Director issued the order to the company as well as the a company director and two significant individual investors who had moved into a managerial role to protect their investment. The order required the parties to decommission a wool knitting and dying mill, requiring decommissioning of 3 lagoons into which effluent had been discharged, disposal of a variety of wastes and fire hazards, and securing the site.

The investors and the director appealed to the Environmental Appeal Board. The Board relieved the director of liability and upheld only the requirement to secure the site against the investors. The basis for its ruling was a set of "fairness" factors, including considerations of causation and fault. Following Appletex, investors, landlords and previous owners had good reason to believe that the MOE would be limited to naming only "guilty" parties.4

In Appletex, the Ontario Environmental Appeal Board commented that the potential to recover the costs of an order could be a relevant factor in assessing the fairness of an order (although the Ontario Court of Justice decision did not address this point5) noting:6

It is possible that when this Board imposes unlimited joint and several liability on a person before it without regard to apportionment or capping of liability, this may result in unjust enrichment of others who may benefit from the clean-up of the land. For example, if, as alleged, the municipality dumped waste on this property, it could be unfair if Messrs. Bell and Harris removed this waste, making the property more valuable, and the municipality then reaped the benefit of this added value when selling the property to recover unpaid municipal taxes.

Unjust enrichment does appear to be a relevant factor when considering the fairness of a clean-up order. However, it may be impossible for the Board to determine whether there will be unjust enrichment without adequate evidence. There are many legal and factual contingencies that make it difficult for this Board to determine which creditors will ultimately recover money, how much each will recover, how much the clean-up will eventually cost, and how the clean-up will affect the value of the property. In this case, the Board does not have sufficient evidence to deal with this issue.

However, this consideration for the impact on the innocent has since been abandoned.

In Kawartha Lakes (City) v. Ontario (Director, MOE), a furnace oil spill on private land migrated onto the neighbouring municipally owned land. The ERT and the Court upheld an Order against the City, issued under s. 157.1, requiring it to clean up the municipally owned land although everyone acknowledged the City was entirely free of fault for the spill.7  In reaching his decision, Tribunal Vice Chair De Marco found that the issue of fault was not relevant to the issues before the ERT and should be considered elsewhere:8

At the end of the day, the EPA seeks to ensure that appropriate environmental measures are carried out by one or more of those who are properly named under the relevant ordering section and who have the capacity to do the work. While it may be interesting that others could have been named or that one party contributed to a problem less than others (or in the case of innocent owners, not at all), those are not really issues that are germane to the questions before the Tribunal. Those interesting issues are practically suited to resolution in another forum. Accordingly, the Tribunal finds that there is an obvious reason why many of the Appletex factors did not find their way into the Compliance Policy. The issuance of orders, and appeals therefrom, are not strictly speaking, meant to make final determinations of financial liability for contaminated sites. Some fairness issues, such as financial hardship, may continue to play an important role in appeals before the Tribunal but many of the other factors are better suited for consideration elsewhere. Indeed, with respect to contaminated sites, which were a focus of the CCME Report, a special regime has been developing to help address relevant issues (e.g., Part XV.1 of the EPA). It would be a mistake to transpose all of those considerations onto appeals arising from section 157.1.

The City appealed to the Environmental Review Tribunal, and sought to introduce evidence as to who was at fault for the reasonableness of the remediation costs.  The City argued that the proposed evidence on who actually caused and exacerbated the damages would be used to make its case on the application of the "fairness" factors, set out in 724597 Ontario Ltd., Re ("Appletex").9 The Tribunal found the evidence was not relevant to the issue before it, whether the order was improperly issued.

Following Kawartha Lakes, where the responsible party has funds or not, innocent parties with the funds to pay for clean-up may find themselves the subject of Director's or Provincial Officer's Orders.

b. Spill Clean-Up Order – Section 97

Pursuant to section 97, the Minister can order anyone whose assistance he or she considers necessary to respond to and clean up a spill. When Minister is of the opinion that there is likely to be an adverse effect and a clean up is in the best interest of the public, he or she may order anything practicable that is necessary to prevent, eliminate, or ameliorate the adverse effects of the spill and restore the natural environment.10 The order can be issued to any of the following:

  1. The owner of the pollutant.
  2. The person having control of the pollutant.
  3. The owner or the person having the charge, management or control of any real property or personal property that is affected or that may reasonably be expected to be affected by the pollutant.
  4. The municipality within whose boundaries the spill occurred.
  5. Any municipality contiguous to the municipality within whose boundaries the spill occurred.
  6. Any municipality that is affected or that may reasonably be expected to be affected by the spill of the pollutant.
  7. Any public authority.
  8. Any person who is or may be adversely affected by the pollutant or whose assistance is necessary, in the opinion of the Minister, to prevent, eliminate or ameliorate the adverse effects or to restore the natural environment.

As a result of this broad power, those who are not responsible for the spill may be ordered to bear the cost of the clean up.


In theory, there are a number of ways an innocent party could obtain compensation. In holding that it is not the appropriate arbiter of fault, the ERT has suggested both the statutory causes of action under the EPA and civil action. For example, in Kawartha Lakes, Vice-Chair De Marco explained:11

In many ways, the Tribunal is not the ultimate decider of whether a polluter, owner, beneficiary or other responsible person "pays". Rather, more narrowly, the Tribunal is deciding whether a polluter, owner, beneficiary, or other responsible person is legally required to carry out certain steps to protect the environment (subject to appeals to the Minister or Divisional Court). Regardless of the City's success in this appeal, ultimate liability may be determined in a civil action, a court proceeding under section 99 of the EPA, an order (and possible appeal) under section 100.1 of the EPA, or through a negotiated or mediated agreement among the relevant parties.


It is hoped that in many cases, innocent owners (whether public or private) will be able to obtain relief in the appropriate forum. However, situations do arise where relief may be unattainable (e.g., unknown actors, insolvent entities, and persons who cannot be found) or where costs need to be incurred to obtain relief. While this is unfortunate, it is not possible to create a system where liability or fault can always be determined swiftly, before the necessary environmental steps are carried out. Rather, it is often the case that environmental action must be done promptly before everything is known about the circumstances giving rise to the problem at hand.

a. Statutory provisions providing for compensation

As noted in Kawartha, section 99 of the EPA creates a right to compensation from the owner or person having control of the pollutant. A full discussion of this complicated provision is beyond the scope of this paper.  Of note is the limitation on who can be pursued under this provision – namely persons having control of the pollutant. In R. v. National Hard Chrome Plating, for example, the MOEE attempted to bring a civil claim against the company's president and three former officers and directors, arguing that they were "persons having control" soley due to their status as officers and directors. The claim was struck out on the basis there was no evidence they had "control" of the pollutant.12 Civil causes of action allow for a broader scope of possible defendants.

Subsection 101(1) creates a right to compensation from the Crown for persons who would be entitled to compensation from the person with ownership or control of the pollutant for "reasonable cost and expense incurred in respect of carrying out or attempting to carry out an order or direction"13. If the Crown pays compensation pursuant to this section, it has the right to recover in the place of the person to whom the compensation was paid.14

Subsection 101(2) sets out a list of those who cannot take advantage of s. 101(1), including:15

  1. the owner of the pollutant;
  2. the person having control of the pollutant;
  3. a person liable at law other than under this Part for loss, damage, cost or expense arising from the spill of the pollutant;
  4. a person that has a right under a contract to payment of the reasonable cost and expense referred to in subsection (1),

or an employee or agent of any of them.

As the liability of an innocent owner arises under Part X of the EPA, the exception set out in paragraph c does not bar them from recovery under this provision. The entire purpose of s. 101(1) is to ensure that innocent parties receive fair compensation for cleaning up spills, even where the responsible parties are insolvent.16

It should be noted that there are special rules under the EPA that allow municipalities and the Crown to obtain compensation for spill clean-up. Pursuant to s. 100.1, mentioned in the excerpt from Kawartha Lakes above, a municipality may issue an order requiring the owner of the pollutant, or the person having control of the pollutant, to pay the municipality the reasonable costs it has incurred in the clean up.17  The order also creates a lien on the property on which the pollutant was spilled for the amount specified in the order.18 In other words, this section creates a mechanism for the province to shift the political heat for collecting cleanup costs from itself to a municipality.

If the province incurs expenses in undertaking a spill clean up, s. 99.1 allows the Director to make an order requiring the owner or person having control of a pollutant to reimburse the Minister of Finance.

b. Common law causes of action

The availability of the environmental torts – nuisance, negligence, trespass and strict liability applying Rylands v. Fletcher – is well covered elsewhere, so we have focused our attention on claims in unjust enrichment. We note, however, that the advantage of the environmental torts is that it is possible to bring an action against those who could not be named in an order under the EPA. Indeed, as noted by the Superior Court of Justice in upholding the ERT decision in Kawartha Lakes:19

It is not the role of the decision-maker to allocate liability or make findings of fault or degrees of fault. People who are named in an order are held to be jointly and severally liable for the clean-up. If determining fault or degrees of fault as between one or more potential orderees is irrelevant to the exercise of a statutory decision-maker under s. 157.1, such a determination of fault becomes much more irrelevant when the parties against whom the findings of fault are sought are not even potential orderees under s. 157.1. In this case the City was seeking to have the Tribunal consider evidence about the fault of the fuel provider, fuel tank manufacturer, insurance company, insurance adjuster, and the MOE itself, none of which were potential orderees under s. 157.1 of the Act. A provincial officer can only make s. 157.1 orders against a "person who owns or who has management or control of an undertaking or property."

The EAB considered the availability of a claim in unjust enrichment in Canadian National Railway, Re,20 decided in 1991. The parties subject to a control order directing a joint study on contamination at a site and evaluation of clean up strategies sought a stay of the order pending their appeal to the Divisional Court. In the submissions, they alleged that unless the injunction were granted, they would suffer "irreparable harm" due to the uncertainty of their ability to recover the cost of the study.

The EAB rejected this argument, finding that the parties had not shown there was a complete bar to their recovery of damages. The Board suggested that the they could recover their costs through a claim for unjust enrichment or recoupment in the law of restitution:21

In any event, the possibility of recovery of costs has to be assessed in all its dimensions: firstly, it might be possible for the party, successful on appeal, to recover its costs against the private party who will ultimately have been held to be the person responsible according to the Act. None of the parties have cited to us any case which indicates that such a recovery is barred. There are several avenues which could be explored in developing a claim for unjust enrichment or recoupment. Although there are some cases indicating that payments made on behalf of someone under a mistake of law will not be recoverable, the Supreme Court of Canada, in Air Canada v. British Columbia, [1989] 1 S.C.R. 1161, [1989] 4 W.W.R. 97, 36 B.C.L.R. (2d) 145, 95 N.R. 1, 59 D.L.R. (4th) 161, 2 T.C.T. 4178, [1989] 1 T.S.T. 2126, 41 C.R.R. 308, at pp. 1199-1201, has abolished the distinction between mistake of law and mistake of fact, and this statement can only be said to help plaintiffs bringing an unjust enrichment action.

There are also other cases which seem to indicate that the discharge of a statutory duty on behalf of someone will be considered to be a benefit to a defendant and entitle the plaintiff to recovery (Carleton (County) v. Ottawa (City), [1965] S.C.R. 663, 52 D.L.R. (2d) 220); similarly for the improvement of a defendant's land Estok v. Heguy (1963), 43 W.W.R. 167, 40 D.L.R. (2d) 88 (B.C. S.C.)) or the compulsory discharge of another's liability (see Lord Goff of Chieveley and Gareth Jones, The Law of Restitution, 3d ed. (London: Sweet & Maxwell, 1986), Ch. 14, particularly the cases of abatement of nuisances for the benefit of someone else). The law of subrogation might also be of help.

The point is that this is an area of law in evolution, like a lot of other areas of the law, and in my view the only argument which can be made on behalf of the applicants is that there is a risk that they may not be successful in their recovery against the private person ultimately found responsible.

In two cases decided in 2011, the Environmental Review Tribunal refused to consider the issue of any potential unjust enrichment, finding that it was irrelevant to the goals of the EPA and must be pursued in "other legal avenues": Currie v. Ontario (Director, Ministry of the Environment)22 and Superior Fine Papers Inc. v. Ontario (Director, Ministry of the Environment)23.

The three part test for unjust enrichment asks whether there has been: 1)an enrichment; 2) a corresponding deprivation; and 3) the absence of any juristic reason, such as a contract or disposition of law, for the enrichment. In short, it must be unjust for the defendant to retain a benefit at the expense of the plaintiff.24

Again, we note that a claim in unjust enrichment could only be brought against a limited number of parties – i.e. those who have been enriched by avoiding the cost of the clean up order. Thus, the claim is limited to the same parties that could have been named on the order.


Thus, our review of the case law found no cases in which an innocent party successfully obtained compensation for the costs it incurred in fulfilling an environmental order.

The obvious question is why. Most likely, the responsible party is insolvent, dead or disappeared; in other cases, parties might have reached a negotiated settlement, or been simply unable to afford to sue. Recent narrowing in environmental torts may also discourage attempts to seek compensation.

One potentially important option that has, to date, gone unused, is section 101 of the EPA. As indicated above, this provision creates a right to compensation from the Crown for cost and expense reasonably incurred to carry out an order or direction relating to a spill. The Crown, in turn, may bring a subrogated action against the guilty party.

Innocent parties forced to clean up spills, whether municipalities or not, should seriously consider section 101 claims. The MOE may rethink the value in ordering innocent owners to clean up spills if the Crown must, in the end, reimburse the innocent party.


The growing gap between tort recoveries and MOE order powers, combined with the ERT's rejection of the Appletex "fairness" doctrine, creates an increasing risk that innocent parties will be saddled with cleanup costs for contamination they did not cause. In theory, such victims can obtain compensation from those responsible, but, in practice, they usually cannot. Is this a fair and reasonable part of a civilized system of law?

In spill cleanup cases, s. 101 offers at least a possibility of restitution, and lawyers should be looking for opportunities to assert such claims. Even municipalities may not have to assume the political, legal and economic burden of collection under s. 100.1. Fairness should not be irrelevant in environmental law.


1. Fibrosa Spolka Akcyjna v. Fairbain Lawson Combe, Barbour Ltd., [1943] A.C. 32; 111 L.J.K.B. 433 (H.L.) at p. 61. This dictum has been approved in many Canadian decisions, including Deglman v. Guaranty Trust, [1954] S.C.R. 725; [1959] 3 D.L.R. 794; Storthoaks R.M. v. Mobil Oil, [1976] 2 S.C.R. 147; [1975] 4 W.W.R. 591, Morrison v. Canadian Surety Co. (1954), 12 W.W.R. (N.S.) 57 (Man. C.A.) and Reeve v. Abraham (1957), 22 W.W.R. (N.S.) 429.

2. R.S.O. 1990, c. E.19  [EPA].

3. 724597 Ontario Ltd., Re (1994), 13 C.E.L.R. (N.S.) 257 (Ont. Environmental App. Bd.) ("Appletex") and 724597 Ontario Ltd., Re (1995), 26 O.R. (3d) 423 (Ont. Div. Ct.) [Appletex].

4. See Jack D. Coop, "Beyond Appletex: The Status of "Fairness" Litigation and the Challenges posed by the Doctrine of "Fairness" (1997) 7 J. Env. L. & Prac. 115 at 118.

5. 724597 Ontario Ltd., Re, 1995 CarswellOnt 977, 18 C.E.L.R. (N.S.) 137, 26 O.R. (3d) 423 (Ont. C.J, (Gen. Div.) Div. Ct.) [Appletex]

6. 724597 Ontario Ltd., Re, 1994 CarswellOnt 333 at paras. 210-211 13 C.E.L.R. (N.S.) 257 [emphasis added] [Appletex, OEAB]

7. Kawartha Lakes (City) v. Ontario (Director, MOE), 2012 CarswellOnt 6579, 2012 ONSC 2708, 215 A.C.W.S. (3d) 125, 67 C.E.L.R. (3d) 123 at paras. 72-74  [Kawartha Lakes (2012)]

8. Kawartha Lakes (City) v. Ontario (Director, Ministry of the Environment), 2009 CarswellOnt 7495, 48 C.E.L.R. (3d) 95 at para. 79 [Kawartha Lakes (2009)] [emphasis added].

9. 724597 Ontario Ltd., Re (1994), 13 C.E.L.R. (N.S.) 257 (Ont. Environmental App. Bd.) ("Appletex") and 724597 Ontario Ltd., Re (1995), 26 O.R. (3d) 423 (Ont. Div. Ct.).

10. EPA, supra, s. 97(2).

11. Kawartha Lakes (2009), supra at para. 87-88.

12. (1996), 60 A.C.W.S. (3d) 289 (Ont. Ct. (Gen. Div.)).

13. Pursuant to s. 99(2)(b) of the EPA, supra.

14. EPA, supra, s. 101(4)-(5).

15. Emphasis added.

16. Dianne Saxe, Ontario Environmental Protection Act Annotated, looseleaf (Toronto, On.: Canada Law Book, 2012) at X-31.

17. EPA, supra s. 100.1(1).

18. EPA, supra s. 100.1(5).

19.  Kawartha Lakes (2012), supra [emphasis added].

20. 1991 CarswellOnt 231, 6 C.E.L.R. (N.S.) 187 (Ont. E.A.B.) [Canadian National Railway].

21.Canadian National Railway, supra at paras. 32-34.

22. 2011 CarswellOnt 5580 at para. 133, 60 C.E.L.R. (3d) 91 (Ont. E.R.T.) [Currie] ["The Tribunal disagrees with the Appellants' submission that the principle of unjust enrichment will relieve against liability under the Director's Order. The goal of the EPA is to ensure that the environment is protected through timely remedial and preventive measures. If there are issues between those named in the order, there are other legal avenues to pursue those issues"].

23. 2011 CarswellOnt 3793 at para. 145, 59 C.E.L.R. (3d) 179 (Ont. E.R.T) [Superior Fine Papers] ["[T]he Tribunal also finds that Cascades' submissions respecting unjust enrichment are not a relevant consideration. Again, the purpose of the Director's Order is to require work to be done that is necessary to protect the environment. This work will be required regardless of who may otherwise benefit from it being done"].

24. See e.g. Becker v. Pettkus (1980), [1980] 2 S.C.R. 834 (S.C.C.).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Dianne Saxe
Meredith James
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